Full credit for this awesome ‘behind the scenes’ explanation goes to Anthony Rubinstein. I highly recommend following his inspiring work on Instagram. 👇
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Feed post number 2
月額報酬100万～の案件多数。
大手上場企業をはじめ2,000件以上の案件実績。
紹介～参画確定までのスピードが速く最短3日で参画可能です。
フリーランス コンサルタントの方
フリーランスへの転身をお考えの方は
登録無料です。
今すぐHPをチェック！
#フリーランスコンサルタント
#フリーコンサルタント
#フリーランス
#フリコン
#コンサルタント
#自営業
#個人事業主
大手上場企業をはじめ2,000件以上の案件実績。
紹介～参画確定までのスピードが速く最短3日で参画可能です。
フリーランス コンサルタントの方
フリーランスへの転身をお考えの方は
登録無料です。
今すぐHPをチェック！
#フリーランスコンサルタント
#フリーコンサルタント
#フリーランス
#フリコン
#コンサルタント
#自営業
#個人事業主
Feed post number 3
An important piece on monetary debasement...
You hear me talk about MOAR COWBELL a lot. This is the meme of monetary and fiscal stimulus that has become a default setting for our world...
To understand why MOAR COWBELL is how the world works now, you need to understand the Magic Formula:
GDP Growth = Population Growth + Productivity Growth + Debt Growth
Real (not nominal) GDP growth is the economic activity that creates cash flows that are invested, saved, or services debts at an economy-wide level.
It's too long an explanation for here but the Magic Formula explains why the trend rate of GDP is only 1.75% and falling.
That 1.75% first goes to service the debts (debt costs take priority over savings or investments) but the US economy is 220% of GDP in total debt...
Thus...
If interest rates average at 2% then interest payments equate to 4.4% of GDP. giving negative GDP growth compounding at -2.65% per annum! The higher the interest costs, the more negative GDP would be.
But to cover their costs, the governments issue more debt and 3 1/2 years later, when it comes up for refi, that debt is monetised via QE, leaving GDP growth to cover the private sector debt payments alone. Without QE there is not enough cash flow to service system-wide debts...
Why every 3 1/2 years? That is the median debt maturity for public and private debt post-2009 when everyone reset rates at zero.
The system in the US, EU, Japan, UK etc CANNOT function without QE now.
The end of 2023 and into 2024 is the next debt refi period, and QE is needed to fund it. Also, any additional crisis tacks on yet more QE - Covid and now the banks.
I think the Fed Balance Sheet gets to $12trn - $14trn in the next 12 months or so.
This chart is extraordinary... (Image 1)
There is simply not enough economic activity and the public debt at 100% of GDP would ENTIRELY crowd out the private sector, so it HAS to be monetized to save the private sector from insolvency.
Here is the chart since Covid... (Image 2)
This all came from an extremely important article from Global Macro Investor - The Truth and The Trap. Here is a small excerpt...which followed on from other articles such as Broken Markets and the Cowbell. (Image 3)
And here is the summary page from it - (Image 4)
And this is why the economy is so perfectly cyclical these days... in an endless up/down cycle that ends in QE and rate cuts (to allow debt servicing). (Image 5)
If you want to know more about The Global Macro Investor just remember it isn't cheap and is only aimed at more sophisticated investors. Ive been writing it for 19 years now...
https://lnkd.in/eRBqTCNX
You hear me talk about MOAR COWBELL a lot. This is the meme of monetary and fiscal stimulus that has become a default setting for our world...
To understand why MOAR COWBELL is how the world works now, you need to understand the Magic Formula:
GDP Growth = Population Growth + Productivity Growth + Debt Growth
Real (not nominal) GDP growth is the economic activity that creates cash flows that are invested, saved, or services debts at an economy-wide level.
It's too long an explanation for here but the Magic Formula explains why the trend rate of GDP is only 1.75% and falling.
That 1.75% first goes to service the debts (debt costs take priority over savings or investments) but the US economy is 220% of GDP in total debt...
Thus...
If interest rates average at 2% then interest payments equate to 4.4% of GDP. giving negative GDP growth compounding at -2.65% per annum! The higher the interest costs, the more negative GDP would be.
But to cover their costs, the governments issue more debt and 3 1/2 years later, when it comes up for refi, that debt is monetised via QE, leaving GDP growth to cover the private sector debt payments alone. Without QE there is not enough cash flow to service system-wide debts...
Why every 3 1/2 years? That is the median debt maturity for public and private debt post-2009 when everyone reset rates at zero.
The system in the US, EU, Japan, UK etc CANNOT function without QE now.
The end of 2023 and into 2024 is the next debt refi period, and QE is needed to fund it. Also, any additional crisis tacks on yet more QE - Covid and now the banks.
I think the Fed Balance Sheet gets to $12trn - $14trn in the next 12 months or so.
This chart is extraordinary... (Image 1)
There is simply not enough economic activity and the public debt at 100% of GDP would ENTIRELY crowd out the private sector, so it HAS to be monetized to save the private sector from insolvency.
Here is the chart since Covid... (Image 2)
This all came from an extremely important article from Global Macro Investor - The Truth and The Trap. Here is a small excerpt...which followed on from other articles such as Broken Markets and the Cowbell. (Image 3)
And here is the summary page from it - (Image 4)
And this is why the economy is so perfectly cyclical these days... in an endless up/down cycle that ends in QE and rate cuts (to allow debt servicing). (Image 5)
If you want to know more about The Global Macro Investor just remember it isn't cheap and is only aimed at more sophisticated investors. Ive been writing it for 19 years now...
https://lnkd.in/eRBqTCNX
It was a wonderful project that got a lot of coverage.
… but one question kept coming up again and again.
“How does it work?”
Well, it’s a surprisingly simple (and very old) technique.
Here’s the 'behind the scenes' in 60 seconds from the amazing Anthony Rubinstein. 👇👏